MF Global close to asset sale and bankruptcy after European debt bets

MF Global is said to be close to agreeing a deal to file for bankruptcy
protection and sell some assets to Interactive Brokers Group, after the
scale of its bets on European debt sent its shares and bonds tumbling.

Jon Corzine, the head of MF Global - the brokerage has rattled investors by taking big bets on the sovereign debt of eurozone countries including Italy and Spain.Photo: Reuters

The futures brokerage, which was spun out of the British hedge fund Man Group in 2007, employs more than 2,000 people, about 700 of them in London at its Canary Wharf office.

MF Global could announce it is filing for bankruptcy protection as early as today, the Wall Street Journal reported, and also announce a deal with Interactive Brokers, the newspaper said.

The brokerage has also reportedly lined up a number of restructuring advisers and bankruptcy specialists should it fail to strike a deal.

MF Global, which is run by former New Jersey Governor and Goldman Sachs executive Jon Corzine, rattled investors last week after disclosing a $191.6m quarterly loss and $6.3bn exposure to the debt of several European countries including Spain and Italy.

The company insisted that the European debt it holds is short-term and will be supported by the European Financial Stability Facility.

That did not stop investors dumping the shares last week. Shares in MF Global closed down 16.1pc at $1.20 on Friday.

Its problems were compounded when both Moody's and Fitch cutting its rating to junk, deepening doubts for customers. counter-parties and investors. A number of banks and brokerages, including Goldman Sachs, Jefferies and Barclays, have had a look at all or parts of MF Global in recent days. The probability of a deal involving Barclays is understood to be low.

"While the pieces are attractive, figuring out potential buyers is a lot harder," said Robert Rutschow, an analyst at CLSA Credit Agricole. "In the current environment, banks can't even go to the bathroom without permission from their regulator, let alone buy a brokerage firm that was looking to grow proprietary trading and expand risk-taking activities."

MF Global's travails represent a dramatic fall from grace for Mr Corzine, a Wall Street heavyweight during more than a decade near the top of Goldman Sachs until he left in 1999. He later went onto become New Jersey Governor but was defeated in his effort in 2009 to secure a second term by Republican Chris Christie.

Since taking over as chief executive of MF Global in March 2010, Mr Corzine has sought to transform a company that began in late eighteenth century London as an agricultural broker, into a trading house that would make bets with its own money.

Analysts say that the most attractive part of MF Global is its retail futures brokerage. A spokeswoman for MF Global declined to comment.

In the UK, MF Global employs more than 700 people in its Canary Wharf office - including traders and equity analysts.